Irina Olkhovskaya: “We have made a sound investment decision”

AO Vostochny Port, operator of Russia’s largest dedicated coal port (run by OOO Port Management Company), is building public railway tracks as part of its project on construction of the coal terminal’s Phase 3, Irina Olkhovskaya, First Deputy to General Director of Port Management Company, told IAA PortNews.

- Ms. Olkhovskaya, could you please tell about the railway part of your project.

- The third phase of the dedicated coal terminal is the largest investment project at the ports of Russia’s Far East. It is being implemented through public private partnership in order to correlate the construction of port and railway facilities. Technical documentation on railway facilities has been approved by Russian Railways. Financing is covered by Port Management Company and Vostochny Port without involvement of the state budget. However, the construction of our terminal’s Phase 3 and railway infrastructure facilities, both public and non-public ones, has been correlated with the federal targeted programme on the development of BAM and Transsib railways.

We are building railway infrastructure facilities of 37,000 meters long. According to specifications issued by Russian Railways we are building two railway railway yards and connecting tracks with total cost of some RUB 5 billion. The scope of work is enormous. It includes two fully equipped and electrified railway yards. The first one consisting of 5 electrified tracks with total length of 7,300 meters will be handled over to Russian Railways. The second one will consist of 12 electrified tracks with total length of 19,000 meters. Besides, there will be connecting tracks with total length of 3,300 meters long and on-site tracks with total length of 7,400 meters.

Russian Railways is supervising all the construction works.

We are very proud that cooperation with Russian Railways has resulted in development of a unique project, new infrastructure of Nakhodka-Vostochnaya station that can be used by both Vostochny Port and all stevedoring companies in the Wrangel settlement.

- What has been done within this project?

- We proceed according to the schedule. We have already completed the first phase. A railway yard for empty railcars departure at the Nakhodka Vostochnaya station was opened to traffic in April 2018. That increased the capacity of the Nakhodka Vostochnaya station by 5 million tonnes. AO Vostochny Port is currently building a railway yard Novy. It will number 12 non-public railway lines able to accommodate trains of 71 railcars each. This phase is to be completed in the first quarter of 2019. So, the increasing turnover of AO Vostochny Port will be supported by railway infrastructure facilities.

- What is the scope of your investments in new transshipment facilities and related infrastructure?

- Total investments in the project on construction of Vostochny Port’s Phase 3 have already exceeded RUB 32 billion from 2012. That amount is spent on construction of hi-tech port facilities that will let increase the throughput by 20 million tonnes per year. About RUB 5 billion of this amount was invested in railway infrastructure facilities.

Port projects usually require capital-intensive investments and are not fast to pay back. Port investors initially assess a cargo base to see if it is predictable and if it covers a long period. Russia’s coal mining industry is generally showing a steady growth which supports our investment decisions.

- What risks are usually taken into consideration by port investors?

- The risks can be divided into two large categories: cargo base risks and railway capacity risks.

As for the cargo base, we have made maximum efforts to reduce this risk to zero, because we started signing contracts on coal transshipment via the Phase 3 facilities as early as in 2012-2014.

Besides, we perform prediction analysis of the global coal market and the coal market of the Asia-Pacific region in particular. We see that the current forecast and the forecast for the coming 5-10 years shows a stable growth. There is also an important factor: when global coal market fell in 2014 Russian coal mining industry increased coal production and exports. Russian coal industry is competitive when compared with, let’s say, suppliers of Indonesia, Australia and other coal mining companies.

The other risk of a port investment project is the throughput and carrying capacity of Russian Railways. We have applied quite a systematic approach to this issue. The decision on construction of the Third Phase was precisely correlated with the decision of the government to develop railways through the expansion of the eastern railways.

Our investment decision was taken immediately after the President of Russia kicked off the reconstruction of BAM and Transsib (Phase 1) following the meeting in Kuzbass in 2012. That is a synchronization of investment processes in different industries – railway, port, mining.

Later Russian shippers showed a new surge in coal production with a possibility of exports. On 27 June 2018, an extensive meeting was held in Kemerovo (fuel and energy industry commission – Ed.). It is very important that RF President made a decision on the second phase of the eastern railway, which additionally confirms synchronization of the port and railway projects and the investment decisions.

- Which companies ship cargo via Vostochny Port today?

- AO Vostochny Port currently has more than 20 such companies. They are producers of Kuzbass, Khakassiam Yakutia. Among them are both well known companies like KRU, SUEK, Kuzbass Fuel Company, Promugolservis and new ones like Mairykhsky, Bungursky, Arshanovsky mines and many others.